UBS on Boston Beer’s upside and the “brewery bubble”

samuel adams boston lager(Boston, MA) – UBS Bank issued a recommendation of “neutral” for Boston Beer Company last week, citing maturity as a reason for what it sees as limited upside. In doing so, the Swiss bank released not only a full report for the brewery but a report on the craft segment, as a whole. Here is one snippet on the so-called “brewery bubble.”

Despite the rapid increase in new brewers, craft volume has outpaced brewer growth over the last three years. As a result, craft volume per brewer has increased from 5,918 bbls in 2008 to 6,321 (we will refer to this as “entrant opportunity”). While the entrant opportunity for craft brewers is growing, its rate of growth is slowing. We believe this is indicative of the brewer bubble nearing its peak.

We are beginning to reach a brewer saturation point, with the slowing entrant opportunity growth. Additionally, the proliferation of brands and SKU’s has made it increasingly difficult for distributors and retailers to allocate space. Small Craft brewers have disadvantaged economies-of-scale and resources. Should volume growth slow, we will enter a period of rapid consolidation, where the surviving brewers will have a greater share of the category.

Bubble or no bubble?

The full report is available at Brewbound.


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2 thoughts on “UBS on Boston Beer’s upside and the “brewery bubble”

  1. Based on what I’m seeing in several localities, there is still significant room on shelf (nothing like 5 years ago, but still room) and even more (much more) space on premise. It is not hard, even in large cities, to find bars or even entire neighborhoods where there is no craft on tap or even in botttles. This goes double for small towns. And while you may say that those are simply bars where you just aren’t going to see craft, you would have said that about certain liquor stores that now carry at least a basic selection of SA, FT and SN. Imagine if every bar that only has domestic premiums on tap now added just one craft tap.

  2. The saturation of production breweries and overwhelmed distributors could see a big rise in brewpubs and nanos. 7th Sun Brewing in Florida has a brewery model more upstarts should emulate: very small, very limited distribution, most kegs rarely leave the tasting room, and the occasional killer (limited) bottle release to keep interest and talk alive.

    Of course, if you’re not doing interesting things, it’ll be hard to keep any new brewery venture alive regardless of the scale. People crap all over rare bottle releases, collaborations, barrel-aged stuff, etc., but lots of small breweries stay afloat from those.

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